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Editor’s note: For a number of years, both Chinese Western economists have commented on China’s out-of-control real estate bubble. According to all indications, the bubble should have burst a long time ago. But it hasn’t—for reasons all of its own. This article by Cai Shenkun uncovers some of the dynamics of China’s distorted real estate market.

The number one dinner table conversation in Beijing these days is the red-hot real estate market. There seems to be no limit for Beijing’s property market; it boasts the most expensive real estate projects, the largest number of buyers, and the most frenzied investor activity.

At the end of 2014, a friend of mine bought an apartment at the West Fourth Ring Road for under 50,000 yuan per square meter (about $740 per square foot). Now it is valued at over 100,000 yuan per square meter. Another friend bought a property in Hebei GuAn last year for 7,000 yuan per square meter, and it is now worth over 20,000 yuan per square meter. Yet another friend brought a property in Tianjin Wuqing earlier this year for 10,000 yuan per square meter. Already, it too is worth over 20,000 yuan per square meter.

It is not purely an economic issue, but also about the survival of the regime.

In Shenzhen and Shanghai home prices are also skyrocketing. Skeptics who forecast the decline in first tier cities are now quiet and have joined the bandwagon of house buyers.

With the downturn of China’s economy, it has become more and more difficult to make money. People find that buying and selling real estate is the only way to get rich, and get rich fast.

As of Sept. 5, 304 properties priced over 100,000 yuan per square meter have been sold this year, nearly five times as many as the 63 sold around the same time in 2015. Furthermore, a record number of 3,849 homes priced over 10 million yuan have been sold.

The community of Golden Huachen, located in a remote mountain area, just won a “grand slam” award. According to data released by developers, 156 four-bedroom apartments with an average price of eight million yuan were sold out 40 minutes after the sale started at 9:30 am. An average of four units were sold per minute, with buyers waiting in line since 6:00 am. The developer grossed 1.3 billion yuan in one day.

The Bubble

People don’t seem to be concerned that China has a big real estate bubble. The observation of one company leader is very characteristic. He said that, based on per capita income, not many people can afford buying homes in Beijing, Shanghai or Shenzhen. The bursting of the real estate bubble is long overdue, he said, but the reason the bubble is getting bigger and bigger and indestructible is because of support from the banks. Should the real estate bubble burst, banks would collapse, followed by the government. So the government makes every effort to prevent the bubble from bursting. It is not purely an economic issue, but also about the survival of the regime.

Home loans make up the majority of most banks’ credit. At the end of this year’s first quarter, 18 listed Chinese banks held a total of 14.12 trillion yuan ($2.1 trillion) in home mortgages. This does not include the huge development loans given to developers. In 2016 many banks launched a home equity loan program, most of them are in the amount of 3 million yuan ($450,000) or more. Some banks even do not have an upper limit. Banks are thus giving tremendous support to the hot real estate market.

Many people have disagreed with the statement that real estate has kidnapped the Chinese economy. Now it seems that real estate has not only kidnapped the Chinese economy, but also the banks, the Party, and every family and individual who has purchased real estate through loans.

Based on the law of the market, housing prices don’t only go up, they also come down. Political factors outside the market also affect real estate prices. The “Chinese Model” that people talk about refers in fact to China’s peculiar real estate wealth accumulation pattern. When a country of 1.3 billion people copies the example of Hong Kong, tying land to revenue, how could real estate prices not go up?

Many people have disagreed with the statement that real estate has kidnapped the Chinese economy. Now it seems that real estate has not only kidnapped the Chinese economy, but also the banks, the Party, and every family and individual who has purchased real estate through loans. From the start, the Chinese real estate market was not about providing homes for better living conditions. This is not a normal real estate market. It is all about politics.

Corruption

Many factors are pushing up China’s real estate prices. In addition to currency issuance, land finance, and government intervention, there is also corruption. Almost every fallen corrupt official owns multiple houses.

In today’s real estate market, ordinary people cannot afford to buy a home, yet corrupt officials own large numbers of properties. It fosters a deep sense of powerlessness and frustration among the people. In fact, housing has become a hard currency. Corrupt officials’ ownership of multiple housing units tells people that abuse of power is indeed very serious in China.

At the end of 1979, China’s RMB currency supply (M2) was 155.5 billion yuan. In 2006, M2 reached a record of 30 trillion yuan ($4.5 trillion), and in 2016 it has soared to 141 trillion yuan, an increase of nearly 1,000 times over 1979. Because China’s real economy has little to recommend it, this massive capital can only circulate in the property market, thus continuously boosting house prices. In this emotionally charged environment, people seem to have lost their rationality and sense for numbers. No matter how much new property comes on the market, it will sell out — for now.

This is an abridged translation of Cai Shenkun’sChinese article, posted on the author’s personal blog. Cai Shenkun is a well-known Chinese economist and blogger. He writes columns for a number of prominent business websites and was named a Top Ten Influential Blog Writer on Phoenix Television’s website for three consecutive years.